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TMI Blog1996 (4) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... at Crude Sorbitol was cleared without payment of duty during the period 2-4-1986 to 31-5-1987. Ascorbic Acid was exempt under Notification 217/86-C.E., dated 2-4-1986 and therefore Crude Sorbitol was liable to pay duty at the rate of 15% ad valorem. It was alleged that duty amounting to Rs. 13,55,995.65 was payable on the Crude Sorbitol captively consumed during the period 2-4-1986 to 31-5-1987. Accordingly a show cause notice was issued on 5-10-1990 asking them to show cause as to why the duty amounting to Rs. 13,55,995.65 should not be recovered from them under proviso to sub-section (1) of Section 11A of the Central Excises Salt Act read with Rule 9(2) of the Central Excise Rules. 3. Shri Willingon Christian, learned Counsel appearing for the appellants submitted that the product is Crude Sorbitol 40% which was a transient product in the form of impure aqueous solution occurring in the process of manufacture of Vitamin C : that this product was described as Crude Sorbitol as concentration was 40%; that Crude Sorbitol was never sold in the market because it was not Sorbitol; that the product contains various impurities such as organic acids, Gluconnates, residual colour impur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Tariff Schedule do become dutiable only when they are marketable. In support of his contention the learned Counsel relied upon and cited the Hon ble Supreme Court s judgment in the case of Moti Laminates Pvt. Ltd. reported in 1995 (76) E.L.T. 241 (S.C.). 7. Test to be applied even to transient items captively consumed in the manufacture of finished products is marketability before levy of duty. In support of this contention the learned Counsel cited and relied upon the decision of the Hon ble Karnataka High Court is the case of Cipla Limited v. Union of India reported in 1990 (46) E.L.T. 240. 8. On the marketability aspect of argument the learned Counsel cited and relied upon the decision of the Tribunal in the case of Indian Textile Paper Tube Company reported in 1995 (26) ETR 121. He also referred to the Board s Circular dated 2-9-1988 on the question of marketability of the goods. 9. Shri A.K. Madan, learned SDR appearing for the respondent Collector submitted that the chemical examiner s report shows that Crude Sorbitol was well defined organic chemical and that it is neither purified nor is required to be purified. The chemical examiner also opined that it has shelf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sold to a consumer. In Union of India v. Delhi Cloth General Mills - 1963 Supp. 1 S.C.R. 585 = 1977 E.L.T. (J 199), this Court considered the meaning of the expression goods for the purposes of the Central Excises and Salt Act, 1944 and observed that to become `goods an article must be something which can ordinarily come to the market to be brought and sold , a definition which was reiterated by this Court in South Bihar Sugar Mills Ltd., etc. v. Union of India Others - (1968) 3 S.C.R. 21 = 1978 E.L.T. 336 (S.C.). 12. The Apex Court in the case of Bhor Industries Ltd. in para 6 of the judgment referred to the decision in the case of Union Carbide India Limited and held that expression goods manufactured or produced must refer to the goods which are capable of being sold to the consumer. In the case of Union of India v. Delhi Cloth General Mills reported in 1977 (1) E.L.T. (J 199) considered the meaning of the expression `goods for the purpose of Central Excises and Salt Act, 1944 and observed that to become goods an article must be something which can ordinarily come to the market to be bought and sold. 13. The other question that was agitated before us was br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but was being marketed as glucose in some form. This would be so since what is liable for duty under Item 1E is glucose in any form and, therefore, in order to demand duty under that Section, the department must establish that the product on which duty was demanded was known in the market as glucose in one form or the other. There is no such evidence as observed by the Tribunal. The Tribunal noted and, in our opinion, rightly that revenue cannot be said to have discharged its burden of establishing that by applying the process of hydrolysis to starch for production of starch hydrolysate the respondent manufactures any excisable goods in the sense of being goods known in the market and being marketed or marketable. Our attention was drawn to the affidavit of Shri P.D. Khandor, Chemist, who was a Food Technologist and was holding a degree of B.Sc. (Chemistry). He stated in his affidavit as follows :- I have seen the starch hydrolysate made by Sarabhai M. Chemicals. It is completely hydrolysed starch. It appears as aqueous syrup containing about 66-71% reducing sugars expressed as Dextrose. It is neither glucose or dextrose in any form nor glucose in liquid state nor liquid glucose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market for the purpose of sale and purchase. In the absence of this evidence we hold that Crude Sorbitol coming into existence in the process of manufacture of Ascorbic Acid is not marketed. 17. The question of marketability was again examined by the Apex Court in the case of Indian Cable Company Limited, Calcutta reported in 1994 (4) E.L.T. 437 (S.C.) in this judgment the Apex Court in para 7 of their judgment had held that :- We are of the view that the provisions of the Act mandate that a finding that the goods are marketable as a prerequisite or sine qua non for the levy of duty. Section 3 of the Act is the charging section : Section 3. Duties, specified in the Schedule to the Central Excise Tariff Act, 1985 to be levied. There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985...... Section 2(d) defines excisable goods . We have quoted the definition in para 5 supra. The word goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisive test for dutiability. It only means saleable , or suitable for sale . It need not be in fact, marketed. The article should be, curable of being sold or being sold, to consumers in the market, as it is without any thing more. The Appellate Tribunal has not adverted to the above vital aspects not has it entered a finding that the PVC compound (granules) is a marketable product as understood in law. The Appellate Tribunal was swayed by the fact that the conversion of PVC resin into PVC compound by the process employed by the appellants amounts to manufacture within the meaning of Section 2(f) of the Act and that by itself will justify the levy of duty. In our view, this is a palpable error committed by the Tribunal. In the absence of a finding, that the goods are marketable i.e. saleable or suitable for sale, we hold that the order of the Appellate Tribunal is infirm. It should be set aside and we hereby do so. We order a remit of the matter to the Appellate Tribunal to consider the appeal afresh and dispose of the same in accordance with law. There shall be no order as to costs in this appeal." 18. The question of marketability coupled with question of discharging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of marketability should be satisfied even in respect of transient item which is captively consumed in the manufacture of other finished products. In particular, the Supreme Court has held that marketability is an essential ingredient in order that an article be dutiable under the Schedule to the Central Excises and Salt Act and also under the Tariff Act, 1985. Simply because a certain article falls within the Schedule, it would not be dutiable under the Excise law, if the said article is not goods" known to the market. It would be necessary to find out whether the goods in dispute are articles known in the market as separate, distinct and identifiable commodities. It has also been held that though actual sale is not necessary, evidence must be produced by the department that the goods, in fact, are capable of being marketable. The facts are uncontroverted in the instant case i.e. that `EMS is not a drug which is known in the trace as a marketable commodity, it has no separate existence of its own as `goods to attract duty of excise and that it is only a bulk drug intermediate which goes into the manufacture of the finished product, namely Salbutamol Sulphate. The department fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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